Cryptocurrency Climate Issues Trigger White House Report

A recent report from the White House on the environmental implications of cryptocurrency may give ESG-conscious investors who use Bitcoin a lot to think about.

Although there is nothing physical about the digital assets themselves, their use has major consequences related to climate change. In the United States, for example, up to 1.7% of all electricity is consumed by cryptocurrency operations, on par with that used by all residential lighting or home computers in the country. , according to the report.

Globally, the energy used to power the most common crypto operations results in the emission of about 140 metric tons of carbon dioxide per year, or about 0.3% of all greenhouse gas emissions. Greenhouse. In the United States alone, up to 50 metric tons of carbon dioxide are emitted each year in connection with digital assets. According to White House report.

Cryptocurrency mining also generates a huge amount of tech waste, with discarded electronics containing cobalt, indium, gold and other metals ending up in landfills. Waste associated with Bitcoin mining alone was estimated at 35,000 tonnes per year in June 2022, roughly the same as all e-waste generated by the Netherlands, the report notes.

“Without standards and the application of proper disposal methods, e-waste can pollute air and water, expose workers to toxic substances and harm public health,” the report said.

Who Uses Bitcoin

Despite the obvious environmental consequences linked to digital assets, people who own shares of ESG-themed funds are more than three times more likely than others to also invest in cryptocurrencies, according to a report published earlier this year by Improvement. Of those with sustainable funds, 80% also had cryptocurrency investments. But for those who don’t hold sustainable funds, only 22% said they had invested in digital assets, according to the report.

This discrepancy is notable, as ESG-conscious investors were also significantly more likely to say they were aware of the climate change implications of crypto. Almost all, 96%, of ESG investors said they were aware of environmental issues, compared to 50% of non-ESG investors, according to Betterment.

In the US fund market, cryptocurrency is very young as a theme. Some ETF providers have products launched which offer exposure to Bitcoin and other digital assets through futures contracts.

What’s behind all this waste

In an article published earlier this year, Morgan Stanley tackled the conundrum ESG-conscious investors also holding cryptocurrencies.

“Every dollar of bitcoin mined is significantly more carbon-intensive than every dollar of gold mined,” said Jessica Alsford, the company’s global head of sustainability research, in the report. The firm estimated Bitcoin’s carbon intensity to be 14 million times greater than that of Visa credit card transactions.

Behind all the carbon is the energy-intensive “proof of work” required to validate most cryptocurrency transactions.

However, that may soon change. Within days, one of the most widely used cryptocurrencies, Ethereum, goes to a less energy-intensive “proof-of-stake” framework, called Merge, some of which claim to reduce electricity consumption by more than 99%.

Proof of Stake chooses random validators for transactions, while proof of work relies on a blockchain network to validate them.

What will happen next

The report from the White House Office of Science and Technology Policy follows an executive order from President Joe Biden in March to examine environmental impacts related to digital assets.

“Crypto-assets can require considerable amounts of electricity, which can lead to greenhouse gas emissions, as well as additional pollution, noise and other local impacts for communities living near facilities. mining”, an announcement of the report Noted. “Depending on the energy intensity of the technology and the electricity sources used, the rapid growth crypto-assets could potentially hamper broader efforts to meet U.S. climate commitments to achieve net-zero carbon pollution.

The report includes recommendations to further study the impacts of cryptocurrency. But it also outlines a future for performance standards and ways to help reduce the negative effects of crypto.

This will likely involve the Environmental Protection Agency, Department of Energy, and other groups working with states, the crypto industry, and communities to develop environmental performance standards.

“These should include standards for very low energy intensities, low water consumption, low noise production, clean energy use by operators, and standards that build up over time for production. carbon-free supplement to match or exceed the additional electrical load of these facilities,” White House noted.

Teresa H. Sadler